Quantum Foods has warned investors of a plunge in annual headline earnings due to higher input costs, accelerating inflation and higher interest rates.
The agribusiness company, spun off from Pioneer Foods in 2014, expects headline earnings per share (Heps), a widely used measure of profit that strips out impairments and one-off items, to drop almost two-thirds to 19.3c for the year to end-September.
The company expects to publish its annual results on November 25.
Quantum Foods, which specialises in animal feeds, eggs, layer and broiler farming, and related businesses said hard-pressed consumers were buying fewer eggs. In addition, the company was hit by an outbreak of avian influenza (HPAI) on the Lemoenkloof layer farm in the Western Cape that led to the culling of about 400,000 hens.
“The relatively large SA layer flock with the current depressed consumer environment has created an imbalance in the supply and demand of eggs,” the food producer, valued at R880m on the JSE, said in a trading statement.
Input costs were also affected by increases in the prices of electricity, gas and fuel, while the Western Cape experienced extreme weather conditions, Quantum Foods said.
“The resultant pressure on egg selling prices with higher production costs resulted in significant margin pressures and losses incurred in the egg business,” it added.
The company also struggled to recover higher production and overhead costs from consumers while some clients postponed or cancelled their orders for point-of-lay hens.
That led to point-of-lay hens being retained on company farms for longer, resulting in a higher cost of production and reduced margins. Egg production was hampered by the HPAI outbreak.
Business Day reported earlier that the HPAI outbreak resulted in the culling of 2-million egg-producing chickens to prevent the spread of the disease.
According to its 2022 interim results, Quantum Foods generated most of its R2.83bn revenue from animal feeds (44.1%), followed by eggs (28.2%), broiler farming (23.2%) and the rest from layer farming.
The feed business took a knock as external sales volumes fell. This was offset by better operational efficiencies and an increase in volumes transferred to the internal poultry business.
The broiler farming business is waiting to benefit from increased production capacity at its Hartbeespoort hatchery, which is expected to be completed by June 2023.
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